As markets and organizations become more and more interconnected, businesses not only recognize the importance of managing their relationships with the individuals and organization they do business with, but also recognize the potential benefits and advantages rooted in the effective management of all of their external relationships.
One such crucial relationship, is that of a business with the companies / individuals from which it buys goods and services. Wheather the goods or services bought are essential ingredients used to form the products which the company later sells to its customers (such as raw materials), or are just elements used by the business to perform its daily business needs (such as office supplies), the relationship the business maintains with its vendors, if managed well, can become an important advantage.

The way Walmart handles its vendors is an extreme example of how vendor management can be used. As the world's largest retail business, Walmart has enormous power over its vendors, some of which even very large and well known corporations are critically dependent on Walmart for their very survival. As illustrated by several television reports and research articles on this company, Walmart brings its vendors down to their knees, effectively dictating their buying prices. Vendors, knowing that not selling to Walmart may knock them completely out of business (some vendors make 50% or more of their sales to Walmart alone), literally cannot afford to say no, particularly in the increasing reality of the global economy, where Walmart can easily buy certain products exclusively oversees. This extreme method of vendor management, dictated by the reality of a virtual monopoly, may be viewed as morally wrong, yet it is an example of vendor management - or in this instance, total control over vendors, dictated by realities of relative market power.

Other businesses, who do not control large segments of markets and cannot give their vendors "an offer they can't refuse", are more dependent on the prices dictated by or negotiated with vendors. Yet, those businesses also benefit from the use of vendor management, particularly when supported by Information Technology. Businesses today rely more and more on storing information about vendors (just as they do about customers), then analyzing this information and using it to their advantage. This information can help, for example, compare vendors offers in more complex and accurate ways than simply

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